U.S. Supreme Court To Hear Arguments In Argentina Debt Case

Argentina and its teetering economy will be affected by case being heard today by the U.S. Supreme Court. The case goes back more than a decade and could have wide implications, not just for Argentina's economy, but also to relations with the U.S.

NPR's Laura Sydell reports.

LAURA SYDELL, BYLINE: Back in 2001, when Argentina was in the midst of a financial crisis that resulted in widespread hunger and deprivation, it defaulted on $80 billion in government bonds. The vast majority of its debtors agreed to take less than they were owed. But, some of the debt was purchased by hedge funds like NML Capital in the Cayman Islands.

Ross Buckley, a professor of law at University of New South Wales in Australia, says NML has been fighting to get the full amount.

ROSS BUCKLEY: They are now claiming back 100 cents on the dollar, when the creditors that lent Argentina the full amount of money in the first place are willing to accept a lot less than 100 cents on the dollar, it's very opportunistic behavior.

SYDELL: Those creditors have been following Argentina around the world. The country's president doesn't fly abroad on Argentine-owned planes anymore for fear the jets will be seized by creditors in other countries.

NML Capital fought in U.S. courts to get repayment from Argentina when Argentina uses the U.S. financial system to pay new bondholders. Lower U.S. courts have agreed to this. Now two challenges to those rulings have made their way to the Supreme Court. One of the main issues is something called the Foreign Sovereign Immunities Act, which protects foreign governments from being sued in U.S. courts.

Steven Davidoff, professor of law at Ohio State University, explains the act.

STEVEN DAVIDOFF: If we started enforcing judgments against other countries, they might do the same against us and you'd end up in a mini war.

SYDELL: The case being heard in the Supreme Court today is seen as a prelude to a second case between NML Capital and Argentina that isn't likely to be in front of the court until its next term.